Blue chips languish, techs slide

Retailers also under the gun

JulieRannazzisi

NEW YORK (CBS.MW) -- Blue chips fell slightly Tuesday, dragged down by Home Depot shares, while a broad-based tech sell-off delivered the Nasdaq a harder punch.

The Dow eased 0.1 percent and the Nasdaq 1.4 percent in their second straight session of declines.

Stephen Massocca, president & head of trading at Pacific Growth Equities, said the market is still looking for major issues -- like earnings and the economy -- to be resolved. But he said it's unlikely the next couple of weeks will yield any answers.

"We're suffering from a dearth of news. There's really nothing significant on the economic front or earnings wise. And Iraq has been put on the backburner for now. That's why the market is languishing."

Concerns about the strength of the holiday shopping season are mounting. Weekly reports from Instinet Redbook and BTM-UBSW showed that chain store sales have weakened in November so far. On Monday, both Wal-Mart and Federated said this month's same-store sales were softer vs. expectations.

The morning's string of economic reports failed to generate any waves in the market: Retail inflation was contained while the trade deficit narrowed a touch from the prior month.

The Dow Jones Industrial Average
DJIA, +0.08%
lost 11.79 points, or 0.1 percent, to 8,474.78 after falling as much as 81 points and rising as much as 60 points.

The biggest drags came from Home Depot, Intel, Microsoft, Hewlett-Packard and Wal-Mart. The heftiest gains came from AT&T, Citigroup, Boeing, Merck and General Electric.

"The market is just drifting. We don't have any upside catalysts and are digesting recent gains," said Donald Selkin, director of equity research at Joseph Stevens.

The Nasdaq Composite
$COMPQ
lost 19.18 points, or 1.4 percent, to 1,374.51 and the Nasdaq 100 Index
$NDX
shaved 19.23 points, or 1.8 percent, to 1,025.96.

Techs were the market's sour spot on Tuesday. Selkin said there's still no evidence that recent advances in technology are justified by improving fundamentals.

Chips were held down by losses in Advanced Micro Devices while sellers took aim at hardware stocks, particularly storage issues like EMC.

CPI as expected; trade deficit narrows

The October consumer price index rose 0.3 percent overall and 0.2 percent at the core, which excludes the often-volatile food and energy components.

The core came in right as expected while the headline number was a shade lower than the 0.4 percent increase that had been projected by economists polled by CBS.MarketWatch.com. See the full story.

Late last week, an unexpected spike in October wholesale prices caused a stir in the marketplace.

"To the extent that last week's PPI jump scared anyone, Tuesday's report should reaffirm that inflation is simply not a concern. At the same time, year-over-year, the overall CPI is up 2 percent and the core component has risen 2.2 percent -- so all the talk about deflation is more than a little premature," commented Steve Stanley, economist at RBS Greenwich Capital.

In other economic news, the September international trade figures revealed a deficit of $38 billion, a touch more than the $37.8 billion that had been expected but less than August's $38.3 billion number. Read story.

Separately, Fed Chief Alan Greenspan told the Council on Foreign Relations that the final outcome of the recent economic slowdown has yet to fully play out, but evidence indicates the global economy has the resiliency to withstand the powerful shocks of the past few years.

The Fed chair also said there's a limit to how much central banks can do to stimulate the economy. See full story.

Retailers struggle

Investors took the shares of Dow component Home Depot down a whopping 12.4 percent after the company told investors on a conference call that it'll post a 3 to 5 percent decline in same-store sales in the fourth quarter. In the meantime, the retailer
HD, +0.92%
reported an as-expected third-quarter profit. Deutsche Banc Securities cut its rating on the home improvement retailer to a "hold" from a "buy" due to its disappointing comparable-store sales and slowing top line. See full story.

On Monday, rival Lowe's
LOW, -0.21%
upped its profit target for the year on belief that the housing market will remain strong in the fourth quarter. Still, shares fell 4.2 percent after ending lower in the previous trading session. Check story.

Office products retailer Staples
SPLS
surged almost 13.3 percent after registering a better-than-expected third-quarter profit and telling investors that it expected 2002 results to top projections due to brisker sales growth and improving margins.

In analyst actions, Bear Stearns lowered its view on Amazon.com
AMZN, -0.89%
to a "peer perform" rating from an "outperform" on valuation and on expectations that the company's upside surprises will be more muted in 2003. The firm, in fact, feels that the online retailer trades at a "significant premium" to its peers. Shares of Amazon lost 5 percent. Check The Ratings Game.

Additionally, USB Piper Jaffray downgraded Biogen
BGEN
to an "underperform" from a "market perform" on belief that the biotech firm trades at a significant premium to its profitable peer group. The stock gave up 2.8 percent.

Xerox
XRX, +0.16%
inched up 0.2 percent after telling investors that it would take a fourth-quarter restructuring charge of $350 million to $400 million due to global cost cutting. See full story.

In the energy patch, Dynegy
DYN, +0.92%
flew over 75 percent after the company's new chief executive told investors on a conference call that there were no plans to file for bankruptcy and that the firm's $1.5 billion of liquidity is sufficient to run the business. Check the story.

In the defense group, TRW
TRW, -4.35%
will sell its auto operations to the Blackstone Group for over $4.7 billion in order to shed non-defense assets ahead of its combination with Northrop Grumman. See full story. TRW climbed 3.8 percent while Northrop piled on 3.4 percent.

AMD tumbles; Microsoft slips after downgrade

AMD revealed early Tuesday that it would offer $300 million worth of convertible notes. Additionally, rating agency S&P lowered its credit rating on AMD to reflect expectations that market conditions will remain challenging and pressures on the "company's ability to achieve its stated goals of significant profitability in 2003." Shares of rival Intel lost 2.2 percent.

EMC
EMC, -1.87%
took the biggest hit among storage stocks, tumbling 9.5 percent. The company said in Tokyo that it saw no signs of a pick-up in IT spending and was reluctant to predict a rebound next year, Reuters reported.

Microsoft
MSFT, -0.71%
fell 1.8 percent after its rating was lowered by Raymond James to a "market perform" from an "outperform" on the back of its recent price appreciation.

AT&T
T, +0.38%
was the Dow's biggest upside mover, tacking on over 8 percent after sliding on Monday following an analyst downgrade. Ma Bell completed the sale of its cable unit to Comcast.

In the meantime, CS First Boston lowered its view on the entire wireless telecom sector to an "underweight" from a "market weight" on the belief that wireless infrastructure is weakening due to ongoing cuts in capital expenditures. Among the stocks CSFB sees having the most upside potential are Qualcomm
QCOM, -0.66%
Nokia
NOK, +0.52%
and Ericsson
ERICD
Qualcomm fell 3.6 percent and Nokia shaved 2.8 percent.

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